$75 Receipt Rule

Are you aware of the $75 receipt rule?

Under the $75 receipt rule, you are not required to keep receipts for overnight travel, gifts, and vehicle expenses IF the expense is under $75.

But should be taking advantage of the $75 rule? Even if you do not need to have receipts for travel, gift, and vehicle expenses, you still need proof of those expenditures! But how do you prove an expense when you do not have a receipt?

Can your bank and credit card statements serve as a proof of the expense the IRS is looking for? – NO. The statements will only prove that you spent money but not what you paid for or business purpose of the expenditure. You can purchase groceries at the gas station and still have it show up on your bank statement as a gas station expenditure.

You can keep daily business mileage and expense log to document all the expenses that fall in that $75-and-less category. IRS Publication 463 has an example of the log you can use. But it is time-consuming and confusing, so our recommendation is to keep receipts for every expenditure and ignore the $75 receipt rule.  To make it less manual, you can utilize a number of receipts management apps currently on the market, like Expensify, Shoeboxed, Evernote, Receipt Bank, Google Drive, Dropbox.

If you need help with record-keeping, expense tracking, or expense maximization, schedule a free consultation.